Manulife’s Q4 Earnings Preview: Asia In Focus
Manulife (NYSE:MFC) is scheduled to report earnings for the fourth quarter of 2016 on Thursday, February 9th. In the first nine months of 2016, Manulife’s revenues increased 136% year-over-year (y-o-y) to $43.5 billion driven by growth in earned premiums as well as investment gains across geographies, especially the United States. The company reported investment income of about $21 billion in the first three quarters of 2016 compared to less than $6 billion in the same period of 2015, driven by gains on invested assets supporting insurance and investment contract liabilities. Net income for the company grew 47% to $2.9 billion, or $1.40 per share, in the nine-month period ending September 2016.
In the upcoming Q4 results, we expect Manulife to build on the growth momentum in Asia. Analysts polled by Reuters expect an average of $0.38 per share for the fourth quarter, implying a growth of 5 cents or 15% over the prior year quarter.
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In Asia, Manulife has operations in Japan, China, Hong Kong, Thailand, Malaysia, Indonesia, Singapore and the Philippines, which together account for about a third of the company’s insurance premiums. In the third quarter, the company reported core earnings growth of 17% y-o-y to $294 million for its Asia operations driven by strong Annualized Premium Equivalent (APE) sales and New Business Value (NBV) sales, which grew 28% and 18% respectively, partially offset by lower favorable policyholder experience and the impact of declining interest rates.
With the exception of Japan, where the company faced headwinds due to pricing competition and declining interest rates, growth was seen in all the other Asian markets. The company’s bancassurance partnership with DBS yielded positive results in Singapore, the Philippines and Vietnam, where the company’s annualized premium sales almost doubled to $265 million.
Manulife Japan is crucial for Manulife’s Asian operations, as half of the company’s Asian insurance sales and 30% of its wealth management product sales come from Japan. The strengthening of the Japanese Yen is likely to impact Manulife’s Q4 results.
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